Top Credit Hedge Funds
Have been asked often recently what are the best credit hedge funds out there. With restructuring and distressed credit getting interesting again below is a good framework for those interested. Curious to what others in the industry think and if I'm missing anything. Hope this is useful.
Tier 1A: Redwood, Diameter, Mudrick, Knighthead, Contrarian, Silver Point, Goldentree
Tier 1B: Iron Park, Cerberus, Apollo, Oaktree
Tier 2: King Street, Angelo Gordon, Davidson Kempner, Antara Capital, Sculptor
Tier 3: Monarch, Brigade, Oak Hill Advisors
Othet Megafunds like KKR, Ares, HPS, Carlyle etc operate strong distressed/special situations funds but don't manage hedge funds to my knowledge
Pretty contrarian if you ask me.
1A add Apollo, Goldentree
Remove from list/lower bucket Contrarian, Antara, Iron Park
I mean AUM wise they are one of the largest credit hedge funds. Have heard negative things about comp and turnover, but in regards to being highly scaled and pretty high on risk curve (re: not just CLOs) it seems like it makes sense to include them
Best returns and track record over past 20 years. Along with probably Silverpoint only place that's been around that long where the founder is still engaged in the minute to minute decisions.
How does canyon fit into this list? Tier 4 or below?
Off the list. Their best analyst/producer of the last 15 years just left to start his own fund. Unclear what they are really trying to do in their HF but the returns have been terrible.
I disagree with this statement. They're one of the longest tenured funds in the space with a very sizeable pool ($10bn+) of hedge fund capital. They had a pretty significant drawdown in 2020 I believe due to retail/offshore exposure but looks like they recovered decently well. They have some smart analysts over there who are involved in a variety of topical situations so would just disagree with idea that they are irrelevant.
Mind sharing what the spin out fund is called?
This is just…wrong, both numerically (returns) as well as reputation wise.
There's still time to delete this post.
What would the correct one look like?
Add Diameter high up
This just blatantly wrong lol
Think we need to clarify this more.
Is this rank based on prestige for a 2-3 year post-banking gig? Or recent returns? Or comp?
Elliot and Aurelius should be somewhere on the list. So should Avenue
Also, it's hard to include firms like Diameter and Silver Point in the same ranking as they are very different investment approaches.
You can't force-rank all credit hedge funds, especially without clarifying your criteria
It's literally just a troll, not that serious
Feel like I haven't seen Elliott in any distressed sits recently at all.
What's your thought on the MN based funds? CarVal, Whitebox, Varde, maybe Castlelake. I've always wondered why there are so many credit HFs in MN and it seems they enjoyed a decent reputation in the industry
Carval: invest primarily out of drawdown/PE style vehicles. 10bn+ of opportunistic AUM so plenty of capital, but in recent years have allocated fairly little to traditional corporate credit and distressed, at least in the US. Made billions in Lehman. Recently bought by Alliance Bernstein
Varde: have both HF and drawdown vehicles, also 10bn+ of opportunistic AUM. Very active in traditional distressed and public credit, takes chunky positions although generally in safer situations
Whitebox: around 5bn AUM across different HF products, multi strat but very active in corporate credit usually with a heavy relval or cap structure arbitrage lens. Also do a lot of small restructurings where they own illiquid reorg equities. Very good returns historically
Castlelake: a lot of growth and expansion lately but do almost nothing in public credit and corporate distressed. Mostly aviation and asset based lending focused
Believe they all spun out of Cargill, as for why there are so many credit HFs in MN.
Mudrick 😂 Bro is mr TV until you work in distressed
My opinion of the best distressed funds: APO, Elliott, Aurelius, Oaktree NY distressed guys (have no clue what this group is called but it's small and they are SHARP), Redwood, Luxor
seen redwood mentioned a few times. how are they good?
Do you (or anyone else for that matter) have an opinion on what other seats have reputations as being good? Optimizing for strong junior compensation, low turnover, good culture, good mandate as a junior (ie; limited or no CLO investing, flexibility to do equities, distressed sophistication). Sounds like not a ton with top type returns, but okay with more middling returns if there is ability to learn.
Feels like Goldentree, Silverpoint, Chatham (edit see comment below on Chatham), Apollo (at least from the equity side), Cerberus, Centerbridge, are supposed to have bad cultures. Brigade you have to do mostly performing, Monarch and Blackrock Credit Alpha are supposed to have pay issues at least at junior levels, Canyon just seems to be generally shit on.
Beyond Redwood, are the Redwood spinouts Knighthead and Nut Tree supposed to be good seats? Larger scaled HF seats at like King St, Davidson Kempner? Credit teams at bigger HFs like Sculptor, Senator? Liquid distressed teams at huge credit managers like Oak Hill / 6th St? Smaller single managers like Mudrick, Glendon, Marblegate, Caspian etc?
I have a good team right now so looking opportunistically but don't have a good gauge. I've gotten offers from one of the bad cultures and have been shown alot of these other firms over the past year so am generally curious.
For my one addition to the thread - see a list of 5 year hedge fund returns from Cliffwater including credit and most of the funds mentioned:
Where did you see the returns if you dont mind sharing? I struggle to understand why many managers (ie sixth street) market their IRR at 15% plus vs ROR. If you are a credit fund and your cost basis is 80, assume you launch in a turbulent year like now, you are going to have double digit annual coupon payments until some of your positions don't work?
Centerbridge credit is top tier.
How does 6th street's liquid distressed strategy compare to some of the tier 2/3 names?
Contrarian and Mudtrick T1? lmao
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